Shifting Sands

Dearth of talent

The demand for well-trained Chinese consultants versed in global business practices has also created a massive gap in the talent pool for consulting firms in China.

"The biggest issue facing management consulting firms is the lack of consultants, as requirements for a consultant are very strict," says Zhou Tianle, chair of the Management Consulting Committee of China Enterprises Confederation, a non-profit organization

"It does not only require the consultants to have specific knowledge in this field, but also possess ample work experience."

But as the industry grows, so will also the number of Chinese graduates returning from overseas studies to begin their careers at home. But until that effectively happens, the industry and the talent will be reliant on each other in China.

While the promise of engaging in the most efficient business practices is alluring, hiring a premium consultant is by no mean a cheap task.

With fees ranging anywhere from 1 million yuan ($158,000, 129,000 euros) to 10 million yuan per case, hiring a top-end firm is a deep pocketed investment for any company. Though the relative immaturity of the industry in China has allowed big firms to record healthy growth rates, it is becoming increasingly competitive.

During the early 2000s when China's potential as an economic juggernaut was first being realized, there were roughly 100 firms offering management consulting services. But as the interest in doing business in China flourished over the past decade, so have also the number of companies offering consulting services, with 28,100 management consulting firms now operating in the Middle Kingdom, according to the IBIS World report.

"It's an intensely dynamic and competitive market," Knight says.

While most of these are medium-sized or boutique firms, unable to cope with the workload of giving a company a complete management overhaul, they offer their services for a fraction of the price. But the difference in price also reflects a difference in services.

While medium and boutique firms can satisfy the basic requirements of small businesses, larger staff and a bigger global network allow premium firms to offer a much wider skill-set than most of the newer players.

"It's quite hard to be successful in China if you've just got a very simple generic set of offerings. Our client expectations have increased immeasurably in recent years - both multinational and local - and you've really got to have something different and something interesting to say to be successful," Knight says.

Though competition for domestic clients between high-end Chinese firms and international firms is fierce, premium firms like Ernst and Young have managed to maintain their advantage in the international arena.

But with multinational companies reeling from issues like the debt crisis in Europe and the slow recovery of the US economy, thereby hampering growth opportunities, China remains a bustling route for expansion.

Business model

While there has been a sudden spike in the number of Chinese companies seeking to adapt and understand global business practices, foreign companies are actually pushing to do the opposite.

"A lot of foreign companies that have come to China initially came, if you like, with their overseas business model and have then found that it helped them to establish in cities like Shanghai or Beijing," Knight says.

"But when they started to try to scale and build their business, particularly when they moved out of the larger cities into the second- and third-tier cities, they found it very hard to compete with the local businesses and needed to radically change their business models."

The result is that multinationals began calling on the experienced premium consultants once again to help shift and sort a workable business model to acclimatize their companies to a more Chinese business environment.

"We're helping Chinese companies understand how they can be successful as national and international players and we're helping foreign companies understand how they can be successful in the local market - they're quite parallel," he says.

In addition to helping foreign multinationals step deeper into China's untouched markets, as the economic situation in the US and Europe continues to flutter premium consultants have also been charged with the much more traditional task of increasing productivity.

With increasing pressure back home and rising service prices in China, several of China's oldest multinational companies are increasingly feeling the need to cut costs.

"Costs are increasing fast, particularly labor costs. At the same time the global economy is looking very uncertain and competition is increasing inexorably in China," Knight says.

External pressures aside, China still holds the key for companies and consultants alike. With an ever-fluctuating economic atmosphere, it is the untapped markets on both sides of the oceans providing the much-needed boost.

Acting as a bridge to the unknown, the world's top consultants are providing the know-how and strategy to help both sides succeed, Knight says.

Nigel Knight, managing partner of Ernst & Young, Greater China. Provided to China Daily

Norman Sze from Deloitte China says adapting global practices to the local culture is crucial for any sort of consulting work. Provided to China Daily

Li Aoxue contributed to this story.

toddbalazovic@chinadaily.com.cn

(China Daily 07/13/2012 page1)